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Published July 16, 2012, 10:21 AM

USDA report bullish but...

Wheat traded with good strength all week with the exception of July 10 (which came under pressure from position squaring ahead of the U.S. Department of Agriculture’s July crop production report).

By: Ray Grabanski, Agweek

Wheat: following corn

Wheat traded with good strength all week with the exception of July 10 (which came under pressure from position squaring ahead of the U.S. Department of Agriculture’s July crop production report). For the week ending July 12, September Minneapolis was up 36.5 cents, September Chicago was up 40.75 cents and September Kansas City was up 38.5 cents. The main supporting factor was another week of sharp gains in the corn market, as well as from friendly USDA supply and demand numbers.

Wheat opened the July 9 session with gains. Early support was a result of disappointing rains over the weekend and hotter than expected temps for much of the Corn Belt region. Again, most of the support was not from wheat news, but from corn news. News of heavy rains and flooding in parts of Russia and the Ukraine helped add strength to wheat.

Wheat returned to the follower role July 12, rallying higher on the coat tails of corn. Corn shook off its July 11 poor performance, chalking most of the move up to profit taking. Traders felt the July 12 losses in wheat were overdone and that added to the session strength. Fundamentally, wheat does not have much to go on, as winter wheat harvest is about wrapping up, while spring wheat harvest is beginning. This should be slightly bearish, but as long as corn remains firm, wheat will trade in tandem.

USDA reported the wheat export inspections pace for the week ending July 6 at 14.9 million bushels. This brings the year-to-date export shipments pace for wheat to 100.5 million bushels, compared with 124.8 million bushels for last year at this time. Wheat export sales pace for the week ending July 6 was estimated at 11.5 million bushels. This brings the year-to-date export sales pace for wheat to 273.6 million bushels, compared with 339.6 million bushels for last year at this time.

As of July 8, 75 percent of the nation’s winter wheat crop had been harvested, compared with 69 percent the week before and 56 percent for the five-year average. Spring wheat heading is estimated to be 88 percent complete, compared with 73 percent the previous week and 55 percent for the five-year average. Spring wheat crop conditions dropped 5 percent to 66 percent good to excellent, 27 percent fair and 7 percent poor to very poor. Last year at this time, the crop was rated 73 percent good to excellent.

Corn: bullish USDA report

For the week ending July 12, September corn gained 36 cents, while December was up 39 cents. The bullish USDA report on July 11 and drought conditions continue to support the corn market. The forecast does have some widespread rain. Traders are waiting for confirmation of moisture.

July 11 was report day and corn traded with a 63-cent range from the high to low. Early support came from the USDA production and supply/demand report, which was extremely bullish. The last USDA report had the corn yield at 166 bushels per acre and trade estimates for this report were at 154 bushels per acre, while USDA came out with a yield of 146 bushels per acre. Stocks were also reduced, with ending stocks for the 2012 to 2013 season at 1.183 billion bushels, which was 100 million bushels below expectations and down from the 1.881 billion bushels last month. Total usage was also lowered by 1.055 billion bushels, with 300 million bushels in exports, 650 million bushels in feed usage and down 100 million bushels in ethanol. This leaves the stocks-to-use ratio at 9.3 percent and down from last month’s projected 13.7 percent. The market did get hit with profit taking at midday and additional sell stops were hit, which pushed the market to trade 30 cents lower and ended down 13 cents. The ethanol report was also disappointing and corn used for ethanol dropped to a 16-week low. Buying interest resurfaced on July 12. Support came from a friendly USDA report, continued dry conditions and decreasing yield estimates for this year’s crop.

The ethanol production for the week ending July 6 averaged 821,000 barrels per day. This is down 4.2 percent versus the previous week and down 5.85 percent versus last year. Corn used in production for the week ending July 6 is estimated at 87.45 million bushels and a new 16-week low. Corn use needs to average 99.621 million bushels per week to meet this crop year’s USDA estimate of 5.05 billion bushels.

Crop conditions had 40 percent of the crop rated as good to excellent, 30 percent fair and 30 percent poor to very poor. Corn silking was at 50 percent, compared with 11 percent one year ago and the five-year average of 19 percent.

USDA’s export inspections report was bearish for corn. There were 22.8 million bushels of corn reported shipped, below the 36.6 million bushels needed to meet USDA’s projection of 1.65 billion bushels. This was within the pre-report estimates of 20 million to 25 million bushels. The export sales report for corn was 26.2 million bushels, of which 6.8 million were old crop and below 7.5 million that was needed to meet USDA’s projection of 1.6 billion bushels. This was above the estimates of 7.9 million to 19.7 million bushels and neutral for corn. Total shipments last week were at 23.8 million bushels, below the 32.6 million bushels needed.

Soybeans: moderate gains

For the week ending July 12, November soybeans were up 23.25 cents. Longer-term fundamentals remain bullish for the soybean market as global stocks tighten.

Soybeans opened and traded with strong gains as most contracts reached another new contract high July 9. Weather remains the primary force in the market, as a lack of rain this week follows excessive heat last week in the heart of the Midwest. The weather forecast is more favorable for some areas, with more rain and less heat expected, but the market will wait for the rain to fall. An expected drop in crop conditions in the July 9 crop progress report was supportive, as traders expected a drop of 3 to 6 percent good to excellent. Export inspections were above the amount needed to keep pace with USDA’s projection.

The July 12 session had soybeans higher throughout the session on spillover support from strong gains in the corn market. Gains were limited by noncommercial long liquidation, as the market is technically overbought. The weather forecast remains threatening and traders expect crop conditions to continue to drop. The July 12 export sales report was bullish, coming in above expectations.

USDA reported soybean export inspections pace for the week ending July 6 at 18.9 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.24 billion bushels, compared with 1.43 billion bushels for last year at this time. The soybean export sales pace for the week ending July 6 was estimated at 27.9 million bushels (12.2 million old crop, 15.7 million new crop). This brings the year-to-date export sales pace for soybeans to 1.395 billion bushels, compared with 1.536 billion bushels last year at this time. With eight weeks left in soybean’s marketing year, shipments need to average 11.9 million bushels and sales have exceeded USDA’s 1.335 billion bushel projection.

Soybean blooming as of July 8 was at 44 percent, compared with 26 percent the previous week and the five-year average of 25 percent. USDA’s weekly crop condition rating report estimated the U.S. soybean crop at 40 percent good to excellent, 33 percent fair and 27 percent poor to very poor, a decrease of 5 percent.

Barley

USDA reported no barley shipments for the week ending July 6. This brings barley’s year-to-date export shipments pace to 48,000 bushels, compared with 1.48 million bushels last year. There was no barely export sales reported the week ending July 6. This brings the year-to-date export sales pace for barley to 3.9 million bushels, compared with 1.2 million bushels for last year at this time.

As of July 8, 82 percent of the nation’s barley was headed, compared with 61 percent the previous week and 52 percent for the five-year average. Barley’s crop condition rating declined 4 percent to 57 percent good to excellent, 31 percent fair and 12 percent poor to very poor.

Cash barley bids in Minneapolis declined last week, putting feed barley at $5.20 per bushel, while malting barley was at $6.50.

Durum

USDA estimated durum export shipments pace for the week ending July 6 at 59,000 bushels with Panama the only destination. There was no durum export sales reported. This brings the year-to-date export sales total for durum to 6.3 million bushels, compared with 6 million bushels for last year at this time.

As of July 8, North Dakota’s durum crop was 85 percent headed, compared with 69 percent the previous week and 29 percent for the five-year average. North Dakota’s durum crop condition rating was unchanged at 83 percent good to excellent, 15 percent fair and 2 percent poor.

Cash bids for milling quality durum were unchanged at $8 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $7.80.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending July 12 with almost $4 (Canadian) gains. Canola traded with strength to start the week, as spillover support from a sharply higher U.S. soybean complex helped push canola higher. Late in the session, canola struggled because of improving crop conditions and thoughts that recent rains in the Corn Belt will help to improve soybeans crop potential.

As of July 8, North Dakota’s canola crop was 95 percent in bloom, compared with 83 percent the previous week and 58 percent for the five-year average. North Dakota’s canola crop condition rating decreased 2 percent to 84 percent good to excellent, 13 percent fair and 3 percent poor. Minnesota’s canola crop rating was unchanged at 60 percent good to excellent, 39 percent fair and 1 percent poor.

July 12 cash canola bids in Velva, N.D., were at $26.39 per hundredweight.

Sunflowers

As of July 8, 3 percent of North Dakota’s sunflower crop was in bloom, compared with 2 percent the previous week and 1 percent for the five-year average. North Dakota’s sunflower crop condition rating improved 3 percent to 83 percent good to excellent, 16 percent fair and 1 percent poor.

Soybean oil export sales pace for the week ending July 6 was estimated at 34.9 trillion metric tons, with 34.4 trillion metric tons being old crop and 0.5 trillion metric tons new crop. This brings the year-to-date total to 523 trillion metric tons, compared with last year’s 1,247.3 trillion metric tons.

July 12 cash sunflower bids in Fargo, N.D., were at $22.85 per hundredweight.

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